An examination of corporate governance in Australia in the wake of a series of corporate collapses after the turn of the century has been recognised at the 2016 Accounting and Finance Association of Australia and New Zealand conference on the Gold Coast.
Griffith Business School researchers, Searat Ali (PhD candidate), Dr Benjamin Liu (principal supervisor) and Dr Jen Je Su (co-principal supervisor) carried out the study which saw their work awarded Best Paper in the Corporate Governance Stream.
The paper is titled ‘Corporate governance and stock liquidity: Panel evidence from 2001 to 2013’ and finds that corporate governance positively and significantly affects stock liquidity, indicating that firms with better corporate governance have a greater stock liquidity.
Searat outlined his motivations for his empirical investigation of the governance-risk nexus.
“A series of corporate collapses happened in the early 2000s due to improper governance structures,” he said. “These included the HIH collapse in 2001 with debts of $5.3 billion.
“I was also motivated by the massive economic and social costs of default to the stakeholders.”
Searat’s PhD research is based on three empirical essays that investigate the impact of corporate governance quality on firm risks in Australia.
The first empirical essay examines if corporate governance quality reduces default risk. The second essay investigates if corporate governance quality affects all stock liquidity dimensions, and the third explores the risk-taking perspective of corporate governance by addressing whether corporate governance has a differential effect on downside and upside risk.
The research is aimed towards the development of a sound corporate governance environment in Australia, where firms increasingly comply with ASX corporate governance recommendations.